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Accounts Receivable Factoring for Business Loans in Canada
A little while ago I received some information from an Import company located just outside Toronto, Canada. The reason the contacted my office was that they were referred to me because their company had out grown their Operating Line of Credit and their bank was unwilling to help them.
The company imports goods from China and has been experiencing strong growth over the last year which lead them to outgrow their current Operations Financing and their current Financial Institution would not increase their limit of $50K.
The terms with their suppliers in China are 30% with the order placement and the balance before the product leaves the warehouse. These are quite popular terms when dealing with China for goods.
The company was selling on average about $125,000 worth of goods per month, and with the Accounts Receivable sitting at about 45 days to collect, the $50,000 Operating Line of Credit was of little good to them. The average open Invoices were $200,000.
In their industry, it is expected that the goods that are ordered by their customers are to be shipped within 7 days which required the Importer to carry inventory as their source of goods was in China.
The owners had tied up their personal assets as much as possible in order to have the cash flow needed to carry the inventory.
The cash flow crunch was cured by my office setting up a new Business Line of Credit for the company using Accounts Receivable Factoring.
With an advance rate of 85% against the $200,000 open invoices, the company now has $170,000 available to them which allowed them to order sufficient inventory to support their growth, pay off the bank Line of Credit and pay off the personal loans they had taken to support the business.
Because the new Funding Line was based on outstanding sales, the Line increased as the sales increased. So as sales grew, so did the availability of funds.
About the Author Wade Henderson is a recognized Professional in Commercial Lending with over 14 years Experience in the Business Finance Field and a strong reputation for getting the deal done. Visit IMMFinancial.com to put his experience to work for you. Factoring Loan * Invoice Factoring * A R Factoring * Small Business Factoring
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